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Strictly Business and Investing Discussions => Business Tax, Accounting & Government Requirements => Topic started by: maky88 on August 05, 2012, 11:49:18 am

Title: BIR requirements in retirement of business
Post by: maky88 on August 05, 2012, 11:49:18 am

Hi

I will be closing down my business this October which I opened last 2006.

Some questions:

1. Can I file with the BIR the retirement of business next year after the filing of the annual ITR on April 2013? I read that the retirement of business is done 10 days after closure of business. When is the reckoning date for the filing of the retirement with the BIR? In my case, I will close this year 2012 but plan to file the retirement of business with the BIR next year 2013. For the meantime, I will still submit all the monthly BIR requirements until after I made the formal retirement on 2013.

2. Should I file the same with the local government or treasury where my business is located?

1. Pursuant to Section 236 of the National Internal Revenue Code, any registered taxpayer shall, whenever applicable, update his registration information with the Revenue District Office where he is registered, specifying therein any change in tax type and other taxpayer details (i.e. change in registered activities/line of industry, change in registered name/ trade name and change in accounting period). Under BIR rules this should be done with 10 days.

So in your case if you are planning to terminate your business in October you should file this 10 days after you have decided to close your business.

Since the answer to the question is 10 days after the termination date therefore you cannot file with the BIR the year after you have decided to terminate your business. Termination can either be death of the sole proprietor, dissolution of the corporation or termination of partnership agreement. So depending on the nature of the termination the reckoning date will be on the date as stated above i.e., death, dissolution, termination of partnership. Under BIR rules there is no such thing as formal termination so it is therefore construed that once business is terminated it is considered as terminated therefore the rule of 10 days will apply.

2. Everything should also be filed with the local government i.e., mayor, treasure, etc. where your business is located.

You also have to notify other departments the procedures are as follows:

Department of Labor and Employment (DOLE)1. Service of a written notice to the employees and the DOLE at least one (1) month before the intended date of closure/cessation2. The closure or cessation of business operations is bona fide in character.3. Payment to the employees of termination pay amounting to at least one-half (1/2) month pay for every year of service, or one (1) month pay whichever is higher, per Philippine Labor Code mandate.

Department of Trade and Industry (DTI)Sole proprietorship1. Letter request signed by the owner2. Affidavit of cancellation of the registered BN, stating the reason/s for the cancellation and that the registered owner has no outstanding financial obligation at the time of closure of establishment3. Original copy of the BN certificate and the duplicate copy of the application form (affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

Corporation/Partnership (Voluntary Cancellation)If dissolved at the Securities and Exchange Commission (SEC),1. Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)2. Certified photocopy of the SEC certificates of dissolution of the corporation/partnership3. Original copy of the business name certificate of registration and the duplicate copy of the application form. (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

If Business Name Registration Only,Corporate Name:1. Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)2. Board resolution/partnership agreement for the cancellation of the registered business name stating that the Corporation/Partnership is retiring from business; surrendering the business name certificate for cancellation and that at the time of closure of establishment the business has no outstanding financial obligation, or a certified copy of the Certificate of Dissolution (if applicable)3. Original copy of the business name certificate and the duplicate copy of the application form (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

Adopted Name1. Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)2. Board Resolution/Partnership agreement for the cancellation of the registered business name, stating the reason/s for the cancellation that the corporation/partnership has no outstanding financial obligation at the time of closure in connection with the operation of the said business and if there were creditors copy of notice to them3. Original copy of the business name certificate and the duplicate copy of the application form (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

I want to ask what to do. I had my business closed last year. I asked my accountant/bookkeeper to do the transaction for me. The DTI as well as the municipal were closed but due to some circumstances, the accountant/bookkeeper wasnt able to close the BIR and I learned of it just recently. In the first few months of my business, I filed no operation since Im on the process of getting my receipts printed at that time. Two months later, I started operating and 2 or 3 months after, I decided to have it close.

What dues do I have to pay with the BIR and what are the steps I need to do? I really have no idea about it and Im afraid of penalties. Can I justify that it's the accountant/bookeeper's fault since if they have the unified server for government agencies, they can I see that it's unintentional on my part not to close the BIR since the DTI and municipal were close.

I had my bookkeeper do the closing in the BIR but it turned out that she didnt do the paperworks. When I asked her what happened she always says that it's okay already. Dont worry Ill do it together with the papers of Mr. Blah, etc. When I approached her earlier this year what she said was, I will be returning everything to you including your money. Which means she didnt really do the paperworks in BIR.

What should I do after this? Do you have any idea on how much should I pay for penalty or can I justify that it's not my fault or intention not to close the BIR since I had the documents from Barangay, Municipal and DTI certifying that I am closing the business and the certificate being issued for BIR purposes.

C. Documentary Requirements1. Notice of closure or cessation of business;2. Notice of Death and Death Certificate, in case of death of an individual;3. Estate Tax Return of the decedent, if applicable;4. List of ending inventory of goods, supplies, including capital goods;5. Inventory of unused sales invoices/official receipts (SI/OR);6. Unused sales invoices/official receipts and all other unutilized accounting forms (e.g., vouchers, debit/credit memos, delivery receipts, purchase orders, etc.) shall be physically submitted to the RDO where the Head Office is registered or where the Authority to Print (ATP) was secured;7. All business notices and permits as well as the COR shall be surrendered for cancellation;8. Other documents necessary to support the changes applied for.

D. ProceduresI. Death of Individual not subject to Estate Tax1. In case of a decedent registered with the BIR who has no properties subject to estate taxes, the heirs shall request for cancellation of the decedent’s TIN by accomplishing BIR Form 1905.2. Notice of Death and Death Certificate shall be submitted to the BIR district office where the TIN of the decedent is registered.3. An affidavit shall be submitted by the heirs stating that the decedent has no properties subject to estate taxes.4. The BIR district office shall notify the heirs, administrator or executor applying for cancellation of decedent’s TIN of the status of the request within ten (10) days from complete submission of the requirements.

II. Settlement of Estate Tax Liabilities1. In case of death of an individual with properties subject to estate taxes and who was previously registered in the ITS database, upon submission of Notice of Death and the Death Certificate of the decedent, the BIR district office shall immediately modify and update the status of the TIN of said decedent as “cancelled” and proceed with the processing and issuance of the TIN of the estate upon application by the executor or administrator.2. If the TIN of such decedent is registered in another BIR district office, the receiving BIR district office shall inform the BIR district office concerned of the fact of such taxpayer’s death by furnishing a copy of the decedent’s Death Certificate. Such BIR district office shall then perform the update as stated in this section.3. The new TIN shall be used in the filing of the estate tax return of the decedent, as well as in the filing of other applicable tax returns (e.g. Income, VAT/ Percentage Tax, etc.) if the estate is under judicial settlement.4. In case the decedent was engaged in business, the heirs/executor/administrator shall, aside from submitting the Notice of Death and Death Certificate submit a short-term income tax return covering the period January 1 until the date of death.The said return shall be filed within sixty (60) days from the date of death, unless the heirs/administrator/executor shall request for an extension of time to file the same, but not to exceed six (6) months or April 15 of the following year, whichever is earlier.The TIN shall be cancelled once the decedent’s business operations including that covered by the short-term return has been duly investigated for tax purposes.5. Decedents with business registration shall be subject to immediate investigation by the BIR office concerned to determine the decedent’s tax liabilities from his / her business. If the business is registered in a BIR district office other than where the Estate Tax Return is filed, the BIR district office which received such return shall inform the BIR district office concerned in writing, either thru fax or via email, for their corresponding action.6. Such BIR district office shall issue a Tax Clearance for the decedent’s business registration within ten (10) days from termination of its investigations and/or full settlement of the taxpayer’s liabilities, if applicable.

III. Dissolution, Merger or Consolidation of Juridical Persons1. All taxpayers who filed for cancellation of registration due to closure/cessation or termination of business, except for branches, shall be subjected to immediate investigation by the BIR office concerned to determine the taxpayer’s tax liabilities.2. For juridical persons, the TIN shall be cancelled at the time of the dissolution, merger or consolidation resulting to termination of their corporate existence through the eventual cancellation of their registration with the BIR. In case of business merger or consolidation, the TIN of the dissolved juridical persons shall be tagged with “Ceased/Dissolved” status. If one of the parties survives, its TIN must be retained, however if a new corporation shall be established, a new TIN shall be issued to such new juridical entity.3. The BIR district office of the HO of the dissolved entity shall inform all the other BIR district office, where the branches are registered, of the closure/cessation of the business.4. To avoid generation of stop filer cases, the BIR district office, upon complete submission by the taxpayer of the requirements shall:a. “End date” the tax types of the taxpayer;b. Destroy/shred in the presence of the taxpayer or his authorized representative, the unutilized SI/ORs and other accounting forms by cutting them crosswise and lengthwise at the middle thereof so that the same shall be divided into four (4), ensuring that the same will no longer be used as originally intended; andc. Return to the taxpayer the destroyed/shredded SI/ORs and other accounting forms for burning and/or proper disposition.d. The BIR distinct office shall issue a Tax Clearance to the taxpayer applying for cancellation of TIN within ten (10) days from termination of its investigations and/or full settlement of the taxpayer’s liabilities, if applicable

I will be closing down my business this October which I opened last 2006.

Some questions:

1. Can I file with the BIR the retirement of business next year after the filing of the annual ITR on April 2013? I read that the retirement of business is done 10 days after closure of business. When is the reckoning date for the filing of the retirement with the BIR? In my case, I will close this year 2012 but plan to file the retirement of business with the BIR next year 2013. For the meantime, I will still submit all the monthly BIR requirements until after I made the formal retirement on 2013.

2. Should I file the same with the local government or treasury where my business is located?

1. just include to your notice of closure for the effectivity date, comply for the requirements2. brgy and cityhall where your business is locatedcheck this link for https://www.bir.gov.ph/index.php/registration-requirements/primary-registration/application-for-registration-update.html#afcob (https://www.bir.gov.ph/index.php/registration-requirements/primary-registration/application-for-registration-update.html#afcob)

I had my bookkeeper do the closing in the BIR but it turned out that she didnt do the paperworks. When I asked her what happened she always says that it's okay already. Dont worry Ill do it together with the papers of Mr. Blah, etc. When I approached her earlier this year what she said was, I will be returning everything to you including your money. Which means she didnt really do the paperworks in BIR.

What should I do after this? Do you have any idea on how much should I pay for penalty or can I justify that it's not my fault or intention not to close the BIR since I had the documents from Barangay, Municipal and DTI certifying that I am closing the business and the certificate being issued for BIR purposes.